Markets

International Paper to Exit Chinese Joint Venture, Shares Up

International Paper Company IP has decided to sell its 55% equity interest in its Chinese coated-board joint venture with Shandong Sun Holding Group Co., Ltd. - IP-Sun JV, and will receive RMB 149 million (roughly $23 million) in cash as consideration for the sale. Shares of the paper products manufacturer climbed over 5% in the trading session following the news release.

The company believes that it could cater to the Chinese and Asian markets more effectively by supplying globally competitive products primarily through its Ilim joint venture in Russia and from the U.S.

The IP-Sun JV has one manufacturing facility in the Shandong Province, which produces about 1.4 million metric tons of coated-board products. International Paper has 18 corrugated box plants in China and South-east Asia, which has a workforce of about 3,000 people.

The transaction is expected to be completed within the next six months, depending on the satisfaction of certain closing conditions, including acquiring requisite approvals from the Chinese government.

The sale will likely result in net pre-tax non-cash asset write-offs of about $200 million, which will be recorded in the third quarter of 2015.

Subsequent to the completion of the transaction, International Paper will also eliminate about $400 million of outstanding debt and other assets and liabilities from the balance sheet of IP-Sun JV.

The Memphis-based paper and packaging products manufacturer will subsequently scout for strategic alternatives for its corrugated box business in China and Southeast Asia. In fact, the company has already inked a non-binding letter of intent with a prospective Chinese buyer.

International Paper currently has a Zacks Rank #3 (Hold). Better-ranked stocks that are worth a look now in the paper & related products industry include Neenah Paper, Inc. NP , Resolute Forest Products Inc. RFP and Orchids Paper Products Company TIS , each carrying a Zacks Rank #2 (Buy).

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INTL PAPER (IP): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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